Podcast
Questions and Answers
What is the maximum time period allocated for shareholders to exercise their pre-emption rights?
What is the maximum time period allocated for shareholders to exercise their pre-emption rights?
In which circumstance can the right of pre-emption be excluded?
In which circumstance can the right of pre-emption be excluded?
How must the offer of subscription on a pre-emptive basis be communicated to shareholders?
How must the offer of subscription on a pre-emptive basis be communicated to shareholders?
Which body or governing entity has the power to restrict or withdraw the right of pre-emption at a general meeting?
Which body or governing entity has the power to restrict or withdraw the right of pre-emption at a general meeting?
Signup and view all the answers
Who typically must approve the restriction or withdrawal of pre-emption rights according to the regulations?
Who typically must approve the restriction or withdrawal of pre-emption rights according to the regulations?
Signup and view all the answers
Under what circumstances can a company exclude pre-emptive rights when offering new shares?
Under what circumstances can a company exclude pre-emptive rights when offering new shares?
Signup and view all the answers
What is required for a material share capital reduction to be valid?
What is required for a material share capital reduction to be valid?
Signup and view all the answers
What condition must be met to justify a mandatory reduction of share capital due to losses?
What condition must be met to justify a mandatory reduction of share capital due to losses?
Signup and view all the answers
What is one of the options available for executing a material share capital reduction?
What is one of the options available for executing a material share capital reduction?
Signup and view all the answers
Which Directive outlines that creditors can apply for safeguards if their claims are at stake due to a capital reduction?
Which Directive outlines that creditors can apply for safeguards if their claims are at stake due to a capital reduction?
Signup and view all the answers
Flashcards
Pre-emption Rights
Pre-emption Rights
Rights attributed to shareholders to purchase new shares before others, proportional to their existing shares.
Exercise Period
Exercise Period
The time frame, typically 15 days, for shareholders to exercise their pre-emption rights.
Preferential Right
Preferential Right
Unexercised pre-emption rights give shareholders a priority for unadopted shares.
General Meeting Approval
General Meeting Approval
Signup and view all the flashcards
Capital Increase Notification
Capital Increase Notification
Signup and view all the flashcards
Pre-emptive right exclusion
Pre-emptive right exclusion
Signup and view all the flashcards
Nominal share capital increase
Nominal share capital increase
Signup and view all the flashcards
Material share capital reduction
Material share capital reduction
Signup and view all the flashcards
Reduction in subscribed capital
Reduction in subscribed capital
Signup and view all the flashcards
Nominal share capital reduction due to losses
Nominal share capital reduction due to losses
Signup and view all the flashcards
Study Notes
Share Capital Reductions and Increases
- Reduction of share capital: A company's assets decrease at the same time as the share capital, either due to losses or other reasons.
- Nominal reduction (reduction for losses): No simultaneous decrease in the company's assets
- Material (or paid) share capital increase: Implies new financial resources (new contributions) and issuance of new shares. Previous contributions must be fully paid-up. There are no losses resulting in compulsory reduction.
- Delegated capital share increase: Bylaws permit the capital share to be increased multiple times.
- Max term for capital increase subscription: 5 years.
- Non-divisible increase: The increase in share capital cannot be partially subscribed.
- EU Directive 2017/1132, Article 68: Any increase in capital must be decided by the general meeting & registered in business register. Authorities may authorize an increase up to a maximum amount (determined by law).
- EU Directive 2017/1132, Article 69: Shares issued for consideration must be paid up to at least 25% of their nominal (or accountable par) value. A premium shall be paid in full.
- EU Directive 2017/1132, Article 70: Shares issued outside of cash consideration must be transferred in full with five years of the decision.
- Right of pre-emption (art. 2441 c.c.): Shareholders have precedence over third-party buyers in capital increases. This right is proportionate to the number of shares a shareholder owns. It has a set duration for exercising the right (15 days usually). Shareholders whose pre-emption rights aren't exercised get preferential rights on unadopted shares. The right of pre-emption can be excluded when shares are issued with a premium or by indirect pre-emption rights. Further, the right is recorded in the business register.
- Nominal (or free) share capital increase (art. 2442 c.c.): Utilizing company assets for increasing share capital with specific procedures.
- Material share capital reduction (art. 2445 c.c.): Outlined methods and reasons for reducing the capital. Includes creditors' opposition procedures, and recording in the company's register.
- EU Directive 2017/1132, Article 73: Any capital reduction, excluding court orders, requires a general meeting decision aligned with quorum/majority rules (without prejudice). The meeting notice must detail the reduction purpose and execution methods.
Additional Notes
- EU Directive 2017/1132, Article 72: A pre-emptive share offer to shareholders is required when increasing capital by cash consideration, based on the shareholder’s proportionate capital holdings. Publication in the national gazette is mandatory or registration if all shares are registered.
- EU Directive 2017/1132, Article 75: Safeguards for creditors during share capital reduction are mandated. Details the rights creditors have if the company's capital is reduced, detailing circumstances and conditions.
- EU Directive 2017/1132, Article 76: Member States may remove safeguards against certain types of capital reductions.
- EU Directive 2017/1132, Article 84: Derogation from certain requirements, allowing member states to exempt requirements in some circumstances. In certain situations, the right to participate in company capital may be excluded for the employees.
- Nominal Share Capital Reduction (due to losses): Optional reduction (less than 1/3), and mandatory reduction (more than 1/3) are explained, each with specific procedures.
- EU Directive 2017/1132, Article 77: The subscribed capital cannot be reduced to be less than minimum capital value unless increased to at least that minimum. Relevant examples of procedures are mentioned.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
This quiz covers the concepts of share capital reductions and increases, focusing on different types such as nominal reductions and material increases. Key legal frameworks, including the EU Directive 2017/1132 and its implications for corporate governance and capital structure, are also included. Test your knowledge on the regulations surrounding equity financing.
